Beer Game Analysis Essay

* IntroductionThe beer plot of ground is a simulation first developed at the Massachusetts Institute of Technologys Sloan coach of Management in the 1960s. This back up was made in other to experiment how reliable governances functions, where the consequences of e very decisions bet out as clearly as possible in the adventure as they would in a real organisation (Senge, 1990). Narayanan Arunachalam (2006) described the crippled as a popular classroom exercise for profession schools conceived at MIT with the primary purpose of demonstrating industrial dynamics. The beer game is a laboratory replica of a real organisational setting, helps to extravagantlylight the possible disabilities and their causes of an organisation. The beer game however in this case was created to fail and talllight possible riddles which an organisation may face in its submit train which is the bullwhip effect. The game includes four players which include the retailer, the wholesaler, the distribu tor and the milling machinery which is in an uplink setting. After playacting the game, down the stairs we leave behind be giving a detailed narration of the events that took place at the course of the game.* Data analysisThe objective of the beer game is to minimize the total m wholenesstary value for everyone in the bring home the bacon kitchen stove by maintaining low stocks and managing to deliver all orders (http//supply reach.mit.edu/games/beer-game, 2011). However, the game was created to fail and below is a marrowmary of events that took place during the game.Figure 1 Inventory/Backorder of the supply reachDuring the course of playing the game, we followed the zip fastener st prescribegy which stated that place zero orders upstream when your individual list is mellower than reward a port. This rule was largely what shaped the game and influenced the results in terms of broth and backorders. The retailer had a extensive good start in the game with a good recor d in inventories of 12 units money box calendar calendar hebdomad 5 when fill rose from guests and this caused the blood line rank to fall. In workweek 6, due(p)(p) to no despatchs and the bullwhip effect, the retailer started having back orders from the customers. Although the command stayed the akin from week 6, the retailer continued to experiencebackorders till week 21 when the wholesaler sent a lot of supplies at once this made the inventories to rise to a peak of 113 units in week 24. The wholesaler started with an descent of 12 units which remained the same in week 2.However, due to incoming shipments from the distributor and a drop of demand from the retailer, the catalogue rose to 16 units in week three and 20 units in week 4 and remained the same till week 6. Due to an join on in demand from the retailer and a lack of shipments from the distributor, the inventories fell to 6 units and in week 7 and at week 8, the wholesaler was having back orders. Backorde rs keep re blow overring and fluctuating until week 21 when it rose to 16 units of inventory and r to each oneed a peak of 136 units in week 25. The distributor during the game had the same inventory reckon for the first two weeks. The distributor maintained similar inventory grade till week 9 when the distributor started recording backorders this was due to the in energy of the distributor to meet the orders of the wholesaler.The distributor continued to experience fluctuations in backorders until week 25 when it got a lot of supplies from the pulverization the inventories at the end of this week was at 40. The factory had started the game with an inventory of 12 units which remained the same till week 10. This was largely due to a lack of huge demands from the distributor. The factory however started experiencing backorders at week11. Backorder rates kept fluctuating during the weeks due to the inability of the factory to meet the needs of the factory on measure. At week 25, the factory got a huge sum of supplies from the brewery which made its inventory to reach a peak of units. The high rate of back orders was caused by dour soupcon durations, the bullwhip effect and the effects of the zero strategy. This made backorders to be on the rise for all the supply chain operators. Increase in demand also played a great role in causing the high number of backorders which in turn made the total live to rise at a higher pace than it should.Figure 2 Order chartAbove is a chart showing the order levels of the Retailer, wholesaler, distributor, factory and customer. At the course of the game, due to the zero strategy, all supply chain operators had to flip zero orders from week one to week 4, because demand was less than the inventory. The customerdemand remained the same at 4 units until week 5. In week 5, demand from the retailers order rate had add-ond from zero to 16 part demand rose to 8 units compared to previous weeks.The orders of the wholesaler, d istributor and factory remained zero in this week because they had high inventories. The decrease in inventories of the retailer resulted in the accession in order rates which was caused by a decrease in shipment which is a bullwhip effect. By week 11, all the supply chain operators had increase their order rate because their inventory levels were down. And back orders followed onside changes in order changes which are all caused by the bullwhip effect. In week 21, the bullwhip effect were decreased which resulted to increased inventories and the zero rule coming in.* Issues that you encountered using the zero strategy* Increase in BackordersThe biggest challenge we faced during the beer game was the challenge of constantly increasing backorders which goat be seen in opine1. The retailer had a peak backorder rate of 49, the wholesaler 90, the distributor 85 and the factory 72 backorders. Backorder means a distribution term that refers to the location of items on a purchase orde r in the event that some or the entire inventory required to fulfill the order is insufficient to satisfy demand exceeding to a waiting limit for the organisation to meet this demand (Donovan, 2010). After using the zero strategy for a few weeks, we frame the backorder like a chain reaction star from retailer up to the factory.* Zero inventory and natural rubber stockWe know that in the real business, zero inventories and stock means that the play a bigs ability of resisting the risk of backorders and paucity of supply is repressd. But this is the case in the beer game where we went on with zero inventory and safety stock for weeks. This showed that the caller-out was incompetent in meeting its own standards.* High rise of constituteCost control is very important for a company, high cost operation is unacceptable. During the beer game, due to the high cost of back orders, we were running on an outrageous cost per week. This was either due to enormousinventory or massive ba ckorders. The cost of the backorders $1.00 and inventory cost $0.60. After we finish this game, we found that the cost of each supply chain operator was high and a total cost of $2, 862. At the initial stage, the increase in cost was little and similar when back orders rose, the cost became tremendous.* Delay in shipment (Long learn time)During the game, it took two weeks for the retailer to get supplies from the wholesaler and twice as long if the wholesaler has not replete resources for the retailer. That means that it took two weeks to receive from the wholesaler, when the wholesaler is out of stock, it takes four weeks, and when the distributor is out of stock it takes six weeks for the distributor to get stock from the factory and finally, when the factory is out of stock, it takes seven weeks for the retailer to receive supplies. This shipment delay devils it difficult to meet customer demands and causes high cost due to backorders.* Lack of communicationDuring the beer gam e there was no communication of any sort between the supply chain operators and this led to so many misjudgements. The lack of communication led to the bullwhip effect which cost us a lot by resulting in back orders, and high cost.* Challenges encountered in beer game* Bullwhip EffectThe bullwhip effect was coined in by follow and Gamble (P&G) when the company experienced extensive demand amplification for their diaper products (Lee et .al, 1997). The bullwhip effect is a phenomenon in the supply chain whereby unpredictable elements introduced by human behaviour in the lower part of the chain becomes much pronounced the higher up the chain they move (Baugher, 2012). By synchronizing the supply chain the bullwhip effect brook be croakd. The bullwhip effect describes how inaccurate data, and a disconnection between production and real time supply chain entropy result in loss of revenue bad customer service, high inventory levels and unrealised profits (Agarwal, 2009). With refer ence to figure 1 above, we depose observe that the bullwhip effect did occur during the beer gamesimulation. An good example of such a situation is in week 5 when the consumer demand increased from 4 units to 8 units.The retailer then made an order of 16 units upstream in week 5, when the wholesaler got the figures the wholesaler then made an order of 20 units in week 7. This continued with the distributor, who logical 25 units upstream in week 9, the reaction of the factory was similar with an order of 26 units in week 11. This shows a spike in demand upstream as illustrated in figure 3. The major cause of the bullwhip effect was the increase in consumer demand in week 5 and 6. Which later came to a normal state in week 7 at 8 units as illustrated in figure 2? The individual demand computes from the supply chain operators also caused the bullwhip effect.Lack of communication is also very common when the supply chain operators may not provide sufficient or accurate information up the supply chain on the subject of current market conditions causing improper levels of inventory (Coyle et.al, 2003). This was the case during the beer game which can be seen that with time, the demand was interpreted differently as it went upstream. This the entire supply chain faced backorders due to the bullwhip effect from week 6 onwards even though the demand remained the same from week 8 onwards. The implications of the bullwhip effect includes excess inventories which was the case at the closing weeks of the game, problems with quality, increased naked as a jaybird materials costs, overtime expenses, increased inventory costs, increased backorder costs and increased shipping costs (Bowersox, D.J, 2007).* Long lead timeLead time delay occurs when the time it takes to obtain, make and deliver the finished goods to a customer takes longer than the time the customer is prepared to wait for it to reach them (Fawcett et.al, 1992). During the beer game, it takes 2weeks for the wholesaler to get information from the retailer and vice versa. It takes the distributor two weeks to get information from the wholesaler and it takes two weeks for the wholesaler to get information from the distributor.It also takes two weeks for the factory to get information from the distributor and two weeks for the distributor to get supplies from the factory. It takes the brewery one week to get information from the factory and one week for the factory to get information from the brewery. So like it was experienced in the beer game,when all the supply chain operators are dried out, doing the math, it takes seven weeks for supplies to go from the brewery down to the consumer, and six weeks for information to go from the retailer to the factory. The longer the lead time, it creates negative impact on the firm as it tames the customers responsiveness and reactions (Stock, J.R and Lambert, D.S, 2001).* Zero strategyThe zero strategy which is a rule for playing the game clearly st ates that we as the operators place zero orders uplink if demand is less than inventory. This went along way to cause a lot of delays in shipments because of long lead times. This is because when the inventory of the retailer as seen in figure 1 becomes less than demand, it took 5 weeks for the factory to encounter such an effect. This made the lead time even longer and caused the bullwhip effect as well as enormous back orders.* take out orders to reduce inventoryDuring the course of the game, we had to neglect backorders in order to reduce inventory and save costs. This can be seen in figure 3 below where the retailer did not dramatically increase demand to meet back orders but did this on a gradual basis in order to reduce inventory and holding cost. However when the supplies finally came, the effects were conscionable as bad with inventory rates skyrocketing overnight. Figure 3 Inventory and Demand of retailer* Ways to improve the zero strategy* mend communicationBy improvin g communication levels among the supply chain operators forget help to solve the problem of assumptions, inappropriate decisions and reduce the bullwhip effect. In both actual supply chains and supply chain simulation, we can cut supply chain fluctuations by 80% by cutting order-to-delivery time by half(prenominal) (Simchi et.al, 2003). Improvement in communication will help to improve the efficiency of the schema by eliminating assumptions and excite a synchronized supply chain which will help in getting all the partners to persist in a way that is mutually supportive, corporative and transparent (Grard P. Cacho et al.)* Point of cut-rate sale (POS) systemPoint of Sale system is a means or can be referred to as a system which is meant to issue with the sales of goods. Point of sale system is software that works with hardware in order to survey and monitor sales in order to give accurate demand and sales information (http//www.gofrugal.com/pos/ point-of-sale.html?gclid=CPyHob rW-q4CFQ8b6wodkDXwwg,2004). By implementing this system, the company can be able to get accurate demand which will help the company in eliminating sudden demand spikes like seen in the beer game. An example of a company which uses such a system is Wal-Mart and the system works well for the company helping to monitor all sales and demand, reduce the risk of inventory shrinkage, manage special demands, maintain control, improve efficiency and help the company make timely and accurate reports (http//www.carolinabarcode. com/run-my-store-a-36.html, 2012).* Just in time inventory systemJust in time (JIT) also known as just in time inventory system manages the inventory and lessens the costs of inventory control and the cost of maintaining the inventory of a business. This helps the company to reduce a substantial meter of its inventories, reduce monastic order and save warehousing costs (Bowersox, D.J, 2007). A real life example of a company using the Just in time inventory system is D ell computer slew which uses the just in time system so that an order for a customized personal computer that comes in over the internet at 9am can be delivered by truck to the customer by 9pm.This system allows dell to save costs and with this, the company under prices its products compared to its rivals by about 10% to 15% (McWilliams, 1997)(Source aged McWilliams, Whirlwind on the web, Business Week, April 7, 1997.). This system would lead to more efficiency of the bear game eliminating backorders and retention just enough stock for the company to produce when needed. This strategy will by many supply chain operators such as the distributor and the wholesaler leaving just the factory and the retailer devising products in stock(predicate) quickly and almost eliminating the bullwhip effect.* Push and Pull BoundaryThe push terminus ad quem process is a forecast and execution driven in anticipation for demand, while the pull process is demand driven and is initiated in response to real demand (Chopra and Meindl, 2001). The present trend around the world is a swing from a push system to a pull system this is because the pull system helps in reducing inventory levels. Push and pull boundary occurs when the demand intersects expectation of future demand. Pull systems are based on real demands and production and manufacturing of goods done in relationship with the demands of the consumers (Bowersox, D.J, 2007).Figure 3 Push/pull boundary in Dells supply chainThe above diagram shows the push and pull boundary of Dells supply chain. The company combines both push and pulls boundary systems in running its operations. The company by-passes a lot of areas in the supply chain by manufacturing and selling directly to its customers. The process starts with consumer ordering and then the manufacturing cycle which are known as pull boundary systems.The inventory of the company will be stocked up following the demand of customers in order for the product to be made. en tirely the processes included in the procurement of a product is implemented by Dell and this is regarded as a push approach primarily because it reacts to future demands effectively making products available in time and keeping low inventories. This system will be of great help to the beer game helping in making raw materials readily available for production and keeping inventories and costs low.* Eliminate gaming in shortage situationsDuring the beer game, the gaming shortage situation was experienced when there was a shortage in raw materials and inventories for the manufacturing of these products. When shortages occur, alternatively of allocating products based on orders, it is allocated in a proportion to past sales record. This will make customers have no need to exaggerate their demands because it will cause them negative results. General motors has used this method for a long time in the allocation of its supply. This will help to make the beer game have more reliable demand data.* Continuous system (fixed order-quantity)In the beer game, order time is the same which is once a week. This makes it easier for the retailers to make quick orders for products required. However, the quantity of the product differs and it would be easier if the demand rate was fixed with adjustments made to make the order rate cater for inventory, buffer stock and demand. This will go a long way in making things easier and decreasing the bullwhip effect which can be seen to be predominant in the game.* latch on the Vendor Managed Inventory StrategyThe vendor managed inventory strategy is a strategy which manages the quantity of goods produced by a manufacturer allowing the manufacturer to decide the quantity to keep and how much to ship to the retailer. This is a strategic move for manufacturers in order for them to be able to increase profitability by eliminating stock while improving on sales and overall performance.* Avoid multiple demand forecast updatesAs can be noted i n the beer game, the bullwhip effect causes the demand forecast to be multiplied as it goes uplink. Instead, making same orders from downstream been the retailer to the supplier to be the same will make things much easier eliminating high inventories and the bullwhip effect.* Reasons for Changes made to the Zero StrategyThe zero strategy is considered as a bad strategy due to its failure during the simulation test. While we obeyed the zero rule of the zero strategy while playing the game, we notice that the game started to fail with a dramatic fall in inventory rate, lack of buffer stock, increase in backorders and a rise in the total operations cost. This led to the total failure of the game because the zero strategy did not allow us to meet the needs of consumers because of too many uplinks in the supply chain and long lead time. The bullwhip effect also posed a great hurt to the strategy because it contributed greatly to the failure of the game. * Impact on the outcome of the g ame* Decrease in cost as a result of little inventories and no backorders.* Elimination of some supply chain operators which will reduce lead time and results in quick flow of information and supplies.* Decrease or eliminate the bullwhip effect.* Decrease lead times and make delivery quicker.* Have safety stock for risky situations.* refinementHaving conducted the above analysis on the zero strategy, it is important that I stress that the bullwhip effect can take a high toll on a company with reference to the game. The game however was a tremendous failure with poor results which includes increase in backorder rates, lack of inventories, rise in cost and long lead time. These issues can however be overcome by using the POS system, just in time inventory system (JIT), improve communication among supply chain operators and the push and pull boundary system. With example of success from companies that have tried these systems and its success in the beer game, I think these changes wil l go a long way in making the beer game simulation a success.